In the mid-1970s and 80s, the manufacturers who were selling direct to the contractors or owned their own "Comfort Corps" decided that they couldn't make the profits they needed so they reentered the two-step distribution pipeline and sold their products through wholesalers or distributors. In fact, many manufacturers who today sell through an independent distributor sold directly to their dealers from the 1950s to 1980s.
What is difficult to understand is how some organizations feel they can operate in a less costly way if they perform all the functions of the distribution pipeline. It takes eight marketing functions to get a product to the end user and each function has a cost attached. These costs cannot be reduced by reducing part of the pipeline or trying to cut corners. All segments of the market must be competitive and must supply certain value-added services. So to think that that by selling direct or buying a part of a market you will reduce overall costs is putting your head in the sand.
Things are changingIn the 1950s, 60s and 70s, there were 144 manufacturers offering the contractor a place to put its confidence and loyalty. Today we have less than half a dozen corporations controlling our industry's hvac equipment manufacturing. Those brand name dealers who put their eggs in one basket now find themselves in one of six baskets without much control over the market they once had and enjoyed. Is it any wonder that contractors felt a need to become stronger and a powerful force in such a market?
Today we have developed an industry that is more unsettled than at any time in my 44 years. Today I see:
- Manufacturers consolidating into six corporations continuing to produce all of the brand names developed during the past 40 years. This happened many years ago with the white goods industry - today many brands are manufactured by one or two groups in the Far East.
- In an effort to obtain more market share, there will be less independent contractors because of consolidation by contractors.
- Manufacturers will continue to acquire some of their dealers and either buy, acquire or create a bond with many others not currently in their stable.
- Some manufacturers will go the route of the mass merchandisers and sell their products like white goods, like Sears and Home Depot.
- Wholesalers will find fewer and fewer equipment brand names available and will become providers of components and supplies.
What really mattersWill this last? History has shown that these changes will find a place but they will not last. Already we can see many pieces of the consolidation movement of the 1990s beginning to fall apart and spin off into new organizations. From someone who has been there, I understand the feeling of wanting to get back your independence.
There are currently many organizations who were acquired during the 90s that will be back again in the trade as independent companies and won't make the same mistake again. Already you can see "new" contractors and wholesalers back in the market and read to rock 'n' roll. I wish them good luck but the answer to their success is to learn how to sell.
The contractor needs to develop a selling style that sells what they do best. Buy comfort components, put them together and install them for the end user to put together the best indoor comfort package available. Manufacturers can buy contractors to do the same thing but the difference is as an independent contractor, you find the best components from various manufacturers, not from just one. It's like building a stereo system - you don't stay with just one name brand; you find the best in the industry and put together a package. Similarly, you can buy the same brand name components for a computer system, but few do because we are willing to find the items that fit our needs.
The key to selling begins with you and your company, not the brand name you happen to offer. Remember, the key to a perfect indoor climate is not just the equipment; it can only happen when the contractor does a quality job.